Minoli Ratnatunga
Director, Regional Economics Research, Center for Regional Economics
California and Human Capital and Indexes & Rankings and Job Creation and Regional Economics
Minoli Ratnatunga is director of regional economics research at the Milken Institute's Center for Regional Economics, where she focuses on regional economic development and regional competitiveness.
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Best-Performing Cities: Innovation Drives Jobs—and Highlights the Importance of Policies That Support It

By: Minoli Ratnatunga
December 13, 2015

This year, many cities with technology hubs have continued to grow, but few have done so as successfully as our No. 1 and No. 2 metros. San Jose-Sunnyvale-Santa Clara, Calif., tops our 2015 list, just edging out last year’s No. 1 metro, San Francisco-San Mateo-Redwood City, Calif., which slipped to second place. That these Bay Area cities continued to outperform their peers after the impressive growth captured on last year’s index demonstrates the momentum that an innovation-based economy can create and sustain.

Spending on technology products and services is driving much of this growth, and both companies and the skilled workforce in the Bay Area have benefited. For example, the San Jose-Sunnyvale-Santa Clara metropolitan statistical area (MSA) is creating and sustaining the professional, scientific and technical services jobs that are a vital part of a high-tech economy.

In 2014, almost 9,000 net positions were added in this sector in the metro area, and more than 29,000 were added between 2009 and 2014. The San Francisco-San Mateo-Redwood City metropolitan division (MD) created approximately 12,500 net jobs in this sector in 2014, and almost 46,000 between 2009 and 2014.

This ongoing growth is putting upward pressure on wages and rents—and pushing some workers and companies to seek more affordable options in surrounding cities. This year, the San Rafael MD and Santa Rosa MSA also placed in the Top 25 best-performing large cities, which means four of the six California metros in the Top 25 are in the Bay Area.

Ways to effectively manage growth and the increasing competition for resources, along with how to create the business climate, infrastructure and workforce that can sustain prosperity, were some of the topics addressed at the Milken Institute’s California Summit, held in the Marina del Rey section of Los Angeles last week. My co-authors and I also explored proposals to maintain and improve California’s innovation-based economy in a recent report.

Outside California, cities that rely on the extraction of oil and gas are seeing investment and exploration in their communities wane in response to lower prices for these energy resources. In contrast to the significant boost provided by investment related to shale exploration during and immediately after the recession, these cities are beginning to drop in the rankings, as other cities recover and tech takes over as the top driver of growth.